American Capital Insurance: Admitted Or Not?

Admitted insurance refers to coverage offered by insurance providers who are licensed to operate by the state insurance departments in which they are based. These agencies govern nearly all aspects of an admitted insurance company's operations, including capitalization requirements, policy forms, rate approvals, and claims handling. American Capital Insurance is an admitted carrier, meaning it is licensed to operate by the state insurance department in the states it operates in. This means that American Capital Insurance complies with the regulations set by the state's department of insurance and that the state will step in to make payments on claims if the company fails financially.

Admitted insurance companies are licensed by the state

State insurance agencies govern nearly all aspects of an admitted insurance company's operations, including capitalization requirements, policy forms, rate approvals, and claims handling. Admitted insurance companies must rigorously comply with insurance regulations established by the state's department of insurance. This includes regulations regarding policy forms, rate approvals, and claims handling.

If an admitted insurance company fails or experiences financial difficulties, the state insurance fund will step in to pay the claims. This provides policyholders with a means of addressing conflicts if they believe their claim has been mishandled. Admitted insurance policyholders have the right to appeal to the state insurance department if they believe their policy was handled incorrectly.

The process of obtaining and maintaining insurance licenses in multiple states can be expensive and challenging. This is where fronting companies come in—they are admitted commercial carriers in many states and can partner with captives to help them obtain compliant insurance without the captives having to invest time and money in obtaining licenses themselves.

In summary, admitted insurance companies are licensed by the state to operate within that state and are subject to the state's regulations and oversight. They provide policyholders with certain protections, such as state-backed claims in the event of the company's failure, and the right to appeal to the state insurance department.

Admitted insurers are backed by the state

Admitted insurers are licensed by the state in which they operate and are therefore backed by the state. This means that they must adhere to the regulations and guidelines set by the state's insurance department. The state will verify that the carrier's insurance policy forms, rates, and requirements adhere to state insurance laws and regulations before allowing them to sell insurance in the state.

Admitted insurers are highly regulated by the state, and their operations are governed by the state insurance agency in which they are based. This includes capitalization requirements, policy forms, rate approvals, and claims handling. Admitted insurers must rigorously comply with insurance regulations established by the state's department of insurance.

If an admitted insurer becomes insolvent or faces financial failure, the state insurance fund will step in to pay the claims. The state's guarantee fund will cover the policyholder's claims, providing an additional layer of protection for policyholders. This backing by the state ensures that policyholders receive their payments and helps to mitigate the risk of financial losses.

In the event of a dispute or if a policyholder believes their claim was mishandled, admitted insurance policyholders have the right to appeal to the state insurance department. This provides a means of addressing conflicts and ensures that policyholders have recourse if they are dissatisfied with the handling of their claim.

Furthermore, purchasing coverage from an admitted insurer can result in cost savings for customers. Admitted insurers are not subject to certain fees and taxes that non-admitted insurers may have to pay. This is because the state's backing eliminates the need for additional expenses, making admitted insurers a more affordable option for customers.

Non-admitted insurers are not licensed by the state

Non-admitted insurance carriers, also known as surplus lines carriers, are insurance companies that are not licensed by the state in which they operate. This means they are not bound by the same regulations and requirements as admitted carriers. Non-admitted insurers are not subject to the same level of regulatory oversight as admitted carriers, and they do not have to submit their insurance rates and policies for approval by the state.

In the United States, non-admitted insurers are typically required to be licensed in their state of domicile and must comply with certain financial requirements. For example, in California, non-admitted insurers must maintain a minimum of $45 million in capital and surplus. While non-admitted insurers are not licensed by individual states, they are still regulated by the state surplus lines office and must comply with certain laws and regulations, such as financial reporting requirements and claims handling procedures.

The lack of a licence from the state means that non-admitted insurers may not be in compliance with the state's insurance laws and regulations. Consequently, if a non-admitted insurer becomes insolvent, the state will not pay outstanding claims, and policyholders may not have their claims paid. Additionally, policyholders who believe their claim was improperly handled do not have the ability to appeal to the state's insurance department.

Non-admitted insurers play a crucial role in the insurance ecosystem by offering specialised coverage for events or risks that admitted carriers are unable or unwilling to cover. They provide coverage for unique or high-risk events, industries, or activities that fall beyond the scope of admitted carriers. Non-admitted insurers have more flexibility in determining premiums, policy terms, and coverage limits, allowing them to tailor their offerings to meet the specific needs of insured individuals or businesses.

Non-admitted insurers are not backed by the state

Non-admitted insurance companies, also known as surplus lines carriers, are not licensed by the state in which they operate. This means they are not backed by the state and do not have to conform to the same regulations and requirements as admitted carriers. They are not bound by the pricing and coverage restrictions set by regulatory bodies and have more flexibility in determining premiums, policy terms, and coverage limits. This allows them to offer unique coverages and coverage forms without state approval and provide coverage for higher-risk events.

The lack of state backing for non-admitted insurers has several implications. Firstly, if a non-admitted insurer becomes insolvent, there is no guarantee that claims will be paid, even if the case is active at the time of bankruptcy or financial failure. Secondly, policyholders who believe their claim was improperly handled have no recourse to appeal to the state's insurance department. Thirdly, non-admitted insurers are not safeguarded by the state's guarantee fund, which provides additional protection for policyholders of admitted insurers in the event of insurer insolvency.

Despite the lack of state backing, non-admitted insurers are not completely unregulated. They must still comply with certain laws and regulations, such as financial reporting requirements and claims handling procedures. Additionally, they are required to work with licensed surplus lines brokers to ensure that the coverage they provide is appropriate for the insured party's needs.

While non-admitted insurers offer specialized coverage and flexibility, the lack of state backing and potential for higher financial risk should be carefully considered by consumers. The decision to choose a non-admitted insurer should be based on a thorough evaluation of the risks and benefits and an understanding of the specific coverage requirements.

Pros and cons of admitted and non-admitted insurers

Admitted insurance is insurance provided by an admitted insurance carrier who is licensed in your state. An admitted insurance carrier contributes to a state's Guaranty Fund and is bound by its regulations and supported by its backing. Admitted insurance is a guarantee for policyholders that their plan will follow standard regulations and they will receive coverage even if their insurer defaults.

Non-admitted insurance is provided by an insurer who is not licensed in your state, although they are likely licensed elsewhere. Non-admitted insurance carriers are not required to follow the same state regulations as admitted carriers, and if the insurance company fails, the state would not step in to make payments on claims.

Admitted insurance pros:

• The state guarantees your claims will be covered through the state guaranty fund if the insurance company fails.
• You have the option to appeal a decision with the state department of insurance if you think your insurance company didn't handle a claim correctly.
• You won't have to pay certain fees or taxes on your policy because the company follows regulations.
• You know what to expect based on standards all admitted insurers are held to.

Admitted insurance cons:

• Low flexibility—because of strict regulation regarding an admitted policy, the plans available to you may not be ideal for your specific needs.
• Gaps in coverage—admitted insurance doesn't cover everything, and there may be gaps in coverage.

Non-admitted insurance pros:

• More flexibility—you can find non-admitted insurance coverage for scenarios you didn't think you'd be able to cover.
• More coverage—your coverage can also be more robust than what some admitted companies are willing to offer.
• Uniformity of cover—it is much easier to ensure that there are no gaps in cover with non-admitted insurance, as well as no overlapping insurance.
• Broader coverage—non-admitted insurance means the parent can dictate the level of cover required in each class, as well as the conditions of the cover, ensuring a uniform level and scope of cover.

Non-admitted insurance cons:

• Illegality—in most countries, it is still illegal to use non-admitted insurers, at least for some classes of insurance.
• Financial penalties may be applied—where a market allows the use of non-admitted insurers, there may be penalties attached to the purchase of insurance from such carriers.
• Premiums may not qualify for tax relief—when premiums are paid to an unlicensed insurer, the transactions may not be considered insurance, and the local revenue authority may decide not to allow the premiums to be tax-deductible.
• Currency fluctuations may mean that claims payments suffer an exchange loss.
• Claims may be viewed as unearned income and subject to tax.
• Loss of control when it comes to local service, assessment of risk, and claims investigations.

Frequently asked questions